ITO, New Delhi V. Sh. Mukesh Kumar Sharma, New Delhi

ITA 523/DEL/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65828 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 20-09-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 02-02-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AROOP KR SINGH
• Assessee Lawyers: RAKESH K SEHGAL
• Keywords: Business income; Income from undisclosed sources; Peak credit; Additional evidence
• Section: 44AD

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E : NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI I. C. SUDHIR, JUDICIAL MEMBER ITA NO. 523/DEL/2012 ASSESSMENT YEAR: 2008- 2009 ITO VS. MUKESH KUMAR SHARMA WARD-3(4) RZG-72B, MANDIR WALI GALI, NEW DELHI. MAHAVIR ENCLAVE, PALAM. NEW DELHI 110 017 (PAN APYPS1381M) (APPELLANT) (RESPO NDENT) APPELLANT BY : SHRI AROOP KR. SINGH, SR. DR RESPONDENT BY : SHR I RAKESH K. SEHGAL, CA DATE OF HEARING : 20-09-2012 DATE OF PRONOUNCEMENT : 31/10/2012 ORDER PER I.C. SUDHIR, JUDICIAL MEMBER THE REVENUE HAS QUESTIONED FIRST APPELLATE O RDER ON THE FOLLOWING GROUNDS :- 1. THE LD. CIT(A) HAS ERRED IN REDUCING THE AD DITION OF RS. 54,60,000/- TO RS. 6,87,000/- RIGHTLY MADE BY THE AO ON ACCOUNT OF UNEXPLAINED CASH DEPOSITS IN THE ASSESSEES BANK AC COUNT TREATED AS INCOME FROM UNDISCLOSED SOURCES, BY ACCEPTING TH E ADDITIONAL EVIDENCE /JUSTIFICATION FILED BY THE ASSESSEE WHICH WERE NOT PRODUCED DURING THE COURSE OF ASSESSMENT PROCEEDING S. 2. THE LD. CIT(A) HAS ERRED IN NOT A LLOWING THE OPPORTUNITY UNDER RULE 46A OF THE INCOME TAX RULES, 196 2 TO THE AO TO EXAMINE AND REBUT THE EVIDENCES PRODUCED BEFORE TH E LD. CIT(A). ITA NO. 523/DEL/2012 2 2. THE RELEVANT FACTS ARE THAT ON THE BASIS OF A IR INFORMATION RECEIVED IN RESPECT OF DEPOSIT OF CASH IN AXIS BANK AND ICICI B ANK DURING ASSTT YEAR 2008- 09, THE AO MADE AN ADDITION OF RS. 54,60,000/-. THE AO ALSO OBSERVED THAT ASSESSEE IS RUNNING CONTRACTORSHIP BUSINESS IN HIS PERSONAL NAME AND IS EXECUTING ALL KINDS OF WORKS AND OTHER CONTRACTS WH ICH HE IS ROUTING THROUGH HIS PERSONAL NAME AND BANK ACCOUNT. THE ASSESSEE SUBMIT TED PROFIT AND LOSS ACCOUNT AND BALANCE SHEET BUT COULD NOT FURNISH BOO KS OF ACCOUNTS DURING ASSESSMENT PROCEEDINGS. AO THUS DID NOT AGREE WITH THE EXPLANATION OF THE ASSESSEE AND ADDED THE WHOLE AMOUNT OF CASH DEPOSIT ED I.E. RS. 54,60,000/- IN HIS BOTH SAVING BANK ACCOUNT TO THE TOTAL INCOME OF THE ASSESSEE. BEFORE THE LD. CIT(A) THE ASSESSEE CONTENDED THAT THE AO HAS NOT B OTHERED TO CHECK THAT THE ABOVE SAID FIGURE IS INCORRECT AS THE SAME IS NOT M ATCHING WITH THE BANK STATEMENTS. THE ASSESSEE SUBMITTED BANK STATEMENT O F BOTH AXIS BANK AND ICICI BANK WITH THIS REQUEST THAT CASH DEPOSITED IN THE ACCOUNT FROM BUSINESS SOURCE IS ONLY RS. 33,14,500/- IN AXIS BANK AND RS. 13,00, 000/- IN ICICI BANK, THUS TOTAL IS RS. 46,14,500/- ONLY. IT WAS CONTENDED FURTHER T HAT THESE ARE RECEIPTS FOR CONTRACTOR BUSINESS AND THE ASSESSEE FILED TRADING AND PROFIT AND LOSS ACCOUNT WITH DETAILS OF EXPENSES. IT WAS CONTENDED FURTHER THAT CONSTRUCTION BUSINESS IS UNORGANIZED SECTOR BUSINESS WHEREIN THERE IS AN INV OLVEMENT OF SEMI SKILLED AND UNSKILLED LABOUR WHO ARE UNEDUCATED AND DO NOT HAVE A PERMANENT ABODE. THEY ALWAYS ACCEPT PAYMENTS OF ALL TYPES IN CASH ONLY. I T WAS SUBMITTED THAT BUILDING MATERIAL AND THE GOODS REQUIRED IN CONSTRUCTION BUS INESS ARE ALSO PROCURED ITA NO. 523/DEL/2012 3 LOCALLY THROUGH AGENTS AND SUPPLIERS WHO DEAL IN CA SH ONLY. FURTHER CONTENTION WERE REMAINED THAT THE PROJECTS UNDERTAKEN BY THE A SSESSEE WERE STILL IN PROGRESS AND ASSESSEE WILL OFFER THE INCOME IF ANY FOR TAXATION ON COMPLETION OF THE PROJECT. IT WAS SUBMITTED THAT THE ASSESSEE IS AT INITIAL STAGE OF BUSINESS, HENCE THEY WERE CHANNELIZING IN ESTABLISHING THEIR BUSINESS. IT WAS ALSO CONTENDED THAT THE AO DID NOT ASK FOR ANY RECORD OR DOCUMENTS TO BE PRODUCED NOR HAS HE ASKED FOR THE PRODUCTION OF THE BOOKS OF ACCOUNTS. HE HAS NOT AFFORDED ANY OPPORTUNITY TO ADDUCE ANY EVIDENCE TO SUPPORT THEIR CLAIM OF RUNNING A BUSINESS AND PROVE THE NATURE OF THEIR BU SINESS. THE ASSESSEE CONTENDED FURTHER THAT THE AO HAS MADE THE ADDITION FROM INCOME FROM UNDISCLOSED SOURCES WITHOUT APPRECIATING THE FACTS THAT NO INCOME CAN BE EARNED WITHOUT INCURRING ANY EXPENDITURE. HE HAS ALSO NOT ACCOUNTED FOR THE CASH WITHDRAWALS MADE BY THE ASSESSEE FOR EXPENDITURE ON VARIOUS HEADS AND ALSO NOT PROVIDED THE ASSESSEE THE BENEFIT OF TELESCOPING AN D PEAK CREDITS. CONSIDERING ALL THESE SUBMISSIONS THE LD. CIT(A) ESTIMATED THE INC OME OF THE ASSESSEE @ 10% OF THE GROSS RECEIPT I.E. 68,70,000/- AND AGREED FO R BUSINESS INCOME OF RS. 6,87,000/-. IN THE RESULT ADDITION OF RS. 6,87,000/ - HAS BEEN SUSTAINED BY THE LD. CIT(A) AGAINST THE ADDITION OF RS. 54,60,000/- MADE BY THE AO ON ACCOUNT OF UNDISCLOSED SOURCES. 3. AGGRIEVED REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 4. IN SUPPORT OF THE GROUND THE LD. DR SUBMITT ED THAT WITHOUT AFFORDING THE OPPORTUNITY TO THE AO TO EXAMINE AND REBUT THE EVID ENCES PRODUCED BY THE ITA NO. 523/DEL/2012 4 ASSESSEE BEFORE HIM, THE LD. CIT(A) WAS NOT JUSTIFI ED IN ADMITTING THOSE EVIDENCE, WHICH IS VIOLATION OF RULE 46A OF THE I.T . RULES 1962. HE SUBMITTED THAT THE ASSESSEE HAD NOT GIVEN DETAILS OF THE BUSINESS AND SOURCE OF CASH WAS NOT DISCLOSED. HE SUBMITTED FURTHER THAT THE LD. CIT(A) HAS APPLIED THE PROVISION OF SECTION 44AD IN ESTIMATING THE PROFIT DESPITE THIS FACT THAT RETURN WAS NOT FILED U/S 44 AD OF THE ACT. LD. DR ALSO REFERRED ASSTT OR DER AND RELIED UPON IT. LD. AR ON THE OTHER HAND TRIED TO JUSTIFY THE FIRST APPELL ATE ORDER. HE SUBMITTED THAT PROFIT AND LOSS ACCOUNT AND BALANCE SHEETS WERE FIL ED BEFORE THE AO. HE REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT( A). HE REFERRED PAGE NO. 1 TO 16 OF THE PAPER BOOK I.E. COPIES OF WRITTEN SUBM ISSIONS DATED 31.12.2010 FURNISHED BEFORE THE AO ALONGWITH TRADING AND PROFI T AND LOSS ACCOUNT, BALANCE SHEET, DETAILS OF CASH DEPOSITS AND STATEMENT OF AC COUNTS IN AXIS BANK LTD. AND ICICI BANK LTD. FOR THE PERIOD. HE SUBMITTED THAT A DDITIONAL EVIDENCE HAS BEEN CONSIDERED BY THE LD. CIT(A). 5. CONSIDERING THE ABOVE SUBMISSIONS WE FIND TH AT THE LD. CIT(A) HAS ESTIMATED THE INCOME @ 10% OF THE GROSS RECEIPT WIT HOUT VERIFYING THE SUBMISSION OF THE ASSESSEE AND ON THE BASIS THAT TH E ASSESSEE AGREED FOR ESTIMATION OF BUSINESS INCOME OF RS. 6,87,000/- I.E . 10% OF THE GROSS RECEIPT. WE HAVE ALREADY DISCUSSED HEREINABOVE ABOUT THE FAC TS OF THE CASE AND SUBMISSIONS OF THE PARTIES. WE THUS IN THE INTEREST OF JUSTICE SET ASIDE THE MATTER TO THE AO TO EXAMINE THE CLAIM OF THE ASSESSEE THAT HE WAS IN CONTRACT BUSINESS AFTER AFFORDING AN OPPORTUNITY TO THE ASSESSEE TO F URNISH DETAILS OF THE ITA NO. 523/DEL/2012 5 TRANSACTIONS, PERSONS WHOSE CONSTRUCTION WORK WAS U NDERTAKEN ON CONTRACT BY HIM AND IF THE AO IS NOT SATISFIED WITH THE EXPLANA TION OF THE ASSESSEE THEN MAKE ADDITION ON THE PEAK OF THE TRANSACTIONS. THE GROUN DS ARE THUS ALLOWED FOR STATISTICAL PURPOSES. 6. CONSEQUENTLY APPEAL IS ALLOWED FOR STATIST ICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST OCTOBER, 2012. SD/- SD/- ( G.D. AGRAWAL) ( I. C. SUDHIR ) VICE PRESIDENT JUDICIAL MEMBER DATE 31/10/2012 *VEENA COPY OF ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER DEPUTY REGISTRAR, ITAT